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Looking back, 2019 may not have been the best year for the real estate sector. However, with several changes introduced during the year, from reduction in taxes to the announcement of a Rs 25,000-crore stress fund, the policy makers tried their best to bring investors, as well as end-users back to the market. The tightening noose around black money transactions, also kept speculative investors away from the market. This was another reason why property prices remained stable, for most part of the year though institutional investors were keen to enter the Indian market.
Reduction in GST in 2019
The highlight of 2019 was the major cut in the Goods and Services Tax (GST) on under-construction properties, from 12% to 5% on residential projects and to 1% on affordable housing projects. This came as a big boost for home buyers who were keen on projects nearing completion but were wary of high GST rates. While the builders were allowed to charge GST on their old projects as per the old rates, most of the builders moved to the new regime, to woo buyers and clear their inventory to generate capital.
Announcement of the real estate stress fund
Bringing hope to investors in stalled housing projects, the finance minister announced a stress fund of Rs 25,000 crores, for non-litigated, net-worth positive real estate projects, as last-mile funding. Industry experts feel that Maharashtra could get a major chunk of this fund, with Ghaziabad and Noida being the other top contenders. The Supreme Court is also evaluating the idea of using this stress fund for the Amarpali Group’s stuck projects.
“The interest shown by the government to revive the sector, will have a ripple effect. It will be instrumental in attracting outside investors, institutions and private capital players into India’s real estate market in 2020. These funds will aid the completion of approximately 3.5 lakh affordable and middle-income housing units,” says Rakesh Reddy, director, Aparna Constructions.
Low home loan interest rates in 2019
The Reserve Bank of India (RBI) reduced the key interest rate by 135 basis points, since February 2019, to neutralise rising inflation. The RBI also directed all financial institutions to link their floating home loan rates with the repo rate, starting October 1, 2019. At present, the repo rate stands at 5.15%.
Home buyers’ rights in insolvency cases
According to a Supreme Court verdict, home buyers now have the same privileges as financial institutions, in insolvency proceedings against real estate developers. Before the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, was passed in parliament, buyers were placed right at the bottom of the committee of creditors (CoC), when the resolution plans for sick developers were to be worked out.
Jaypee and Amrapali cases inch towards resolution
The proceedings against two major real estate players – Jaypee and Amrapali – are finally progressing. While Jaypee’s lenders, including buyers, have sided with state-owned NBCC to take over Jaypee Infratech and complete its stuck projects; in the Amrapali case, the top court, in July 2019, cancelled the registration of all Amrapali Group projects registered with the Uttar Pradesh Real Estate Regulatory Authority (UPRERA). The court has also asked the NBCC to take over all pending projects of the embattled builder.
Major infrastructure projects in metro cities
Almost all the top real estate markets saw some major infrastructure developments that improved the livability quotient for home buyers. While the Delhi Metro’s Aqua Line, Blue Line and Grey Line were inaugurated, Bengaluru’s Namma Metro received an approval for its extension till the airport, crossing some of the new layouts in the city. Ahmedabad Metro was also inaugurated, while Hyderabad and Chennai Metro saw improved ridership as the metro route reached some of the popular business and housing hubs. Kolkata’s East-West Metro saw a major setback, as the tunneling work caused an aquifer to burst, resulting in the collapse of multiple buildings. The Maharashtra government also stayed the construction of a car-shed in Mumbai’s Aarey Colony area.
“While the leading real estate markets like Delhi, Mumbai and Kolkata were adversely impacted by shifting policies, Hyderabad and Bengaluru were stable. In the first half of 2019, Hyderabad clocked a 129% spike in office space development and 47% increase in residential units launched. There was a massive 67% decrease in unsold inventory in the same period. Some of the aspects that helped Hyderabad, include the value-for-money that builders were open to offer and the availability of premium amenities, even in the mid-range categories,” adds Reddy.
Real estate market outlook for 2020
The industry is experiencing an upswing, backed by innovative government policies and increased interest of both, local and foreign investors, says Agnelorajesh Athaide, co-founder of SAVV Global. “Private equity inflows in the Indian real estate sector rose by 26% to USD 3.9 billion in the first half of 2019, establishing the rising confidence of institutional investors in the real estate sector. With opportunities worth Rs 1.25 trillion (USD 19.65 billion), 2020 will prove to be a year of high growth for the Indian real estate sector,” Athaide concludes.